House chairman to release seven principles for online sales tax

The Judiciary chairman’s principles additionally call for any legislation on the issue to be simple enough to ensure that an exemption for small businesses isn’t necessary.

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Backers and opponents of the MFA have been sparring over whether to expand the current exemption in the measure, for businesses with under $1 million exemption for out-of-state sales. The two sides were briefed separately on Tuesday, as part of three overall meetings.

Goodlatte will also seek to ensure that online and brick-and-mortar retailers are competing on a level playing field, and that consumer data is protected.

And sources on both sides of the issue say the principles will look to limit how much a state can regulate a business not located within its borders, and encourage state governments to compete for businesses through their tax policies.

Goodlatte is far from alone among House Republicans in being skeptical of the Senate bill. Speaker John Boehner (R-Ohio) has himself said he didn’t think he could support it, and a slew of younger, Tea Party-linked lawmakers have roundly panned the bill.

But supporters both in and out of the GOP say that the measure could help cash-strapped state and local governments, and have pointed out that many Republican governors backing the legislation have said they’ll use the revenue to otherwise lower residents’ tax bills.

Under current law, states can only collect sales tax revenue from businesses that are physically located in that state, due to a two-decade old Supreme Court ruling.

The Marketplace Fairness Act (MFA) generally would let states collect sales tax revenue from an online purchase made by one of their residents, regardless of where the retailer sets up shop.

Online shoppers are normally supposed to report and pay taxes on their purchases, but few actually do.

Both supporters and opponents left their Tuesday briefings on Goodlatte’s principles claiming victory, at least in part because the chairman’s outline was so broad.

Opponents of the Senate bill said that it would be nearly impossible to reconcile that measure with Goodlatte’s principles. For instance, opponents say that not allowing states to regulate out-of-state businesses would limit their ability to tax those companies — a key plank of the MFA.

One opponent of the bill went so far as to say that “the MFA as written is dead on arrival in the House.”

“MFA advocates may think they can tweak their bill to arrive at the Judiciary principles, but the message they should take from the Chairman’s announcement is clear: you can’t get there from here,” Steve DelBianco of NetChoice, an opponent of the bill, said in a statement.

But supporters said that even they thought that the Senate bill would need some tweaking to get through the House, and that many opponents of the bill believe that the current law is perfectly acceptable.

Plus, backers insist that Goodlatte is acknowledging that there’s an uneven playing field for online and brick-and-mortar shops that needs to be fixed, and that they interpreted the out-of-state regulation principle as trying to limit audits.

The Marketplace Fairness Coalition, a group of MFA backers, said they hope that the Judiciary Committee would quickly build on the principles by crafting legislation.

“It’s clear that Chairman Goodlatte is committed, as are many in Congress, to finally addressing this critical issue and leveling the playing field for all American businesses,” the coalition said in a statement. “The release of these principles will be a great first step in the House of Representatives towards closing the online loophole and restoring basic free market competition.”